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TransCanada Begins Exit from Midstream

TransCanada Begins Exit from Midstream

TransCanada PipeLines has taken the first steps in a bold plan to divest $3 billion in assets in its Canadian midstream, international and refined products transportation businesses. The company sold subsidiary NovaGas Canada LP's Provost gas plant and gathering system to a subsidiary of Midcoast Energy Resources Inc. last week for an undisclosed sum and completed the sale of its Pesh Creek processing complex and East Australia pipeline system earlier this month. The total value of the two Canadian processing plant transactions comes to about $42 million.

TransCanada intends to continue unloading midstream and international assets as well as the Express Pipeline operation and its Cancarb carbon thermal black manufacturing business in an attempt to gain financial flexibility and refocus on the core Canadian gas transportation business. The divestitures are expected to be near completion by the end of the year. The company booked a $700 million net loss during the fourth quarter of last year for all of the discontinued operations being sold.

The first phase of its Canadian midstream divestitures is expected to be completed this month with the sale of the Gordondale and Caribou plants. Next month the company will start phase II which will include four other gathering and processing assets, including the Zama Lake, East Crossfield, Mosquito/Parkland and Clearville plants and related facilities. The last phase of the G&P assets sales will begin in May. It's liquids extraction business will be sold as one package, and it may take through the end of the year to complete the sale, a spokesman said.

Although it is not putting price tags on assets, the bulk of the $3 billion proceeds will come from International operations, which are concentrated in northern Europe, East Asia and Latin America. Canadian midstream assets, including gathering and processing and gas liquids and extraction, will be next on the list in terms of greatest value. In total, one-third of its 4,400-person workforce will be affected.

In contrast to TransCanada, Midcoast is just getting started in Canadian Midstream, and the Provost assets make a good addition to the other Alberta systems the company bought recently. Provost includes 80 miles of gas gathering pipeline and a 15 MMcf/d sour gas processing plant and sour gas injection well. The facilities are located in east-central Alberta and include the only sour gas gathering and processing system in the area. The system is connected to 21 oil batteries and gathers primarily associated sour gas production from 900 wells in the Provost area.

"The purchase of the Provost system adds another attractive asset to our rapidly growing base of operations in Canada," said Midcoast Canada President Jim Wright. "Along with the previously announced purchase of the Manyberries system and our acquisition last year of the Calmar system, Midcoast will own nearly 200 miles of crude oil and natural gas pipeline and two processing facilities with a combined capacity of 45 MMcf/day. We remain very excited by the prospects we see for future growth in Canada and are continuing to aggressively pursue these opportunities."

Rocco Canonica

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